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EMC hopes for Data Domain 'I do'

NetApp left standing at the altar

Comment Dan Warmenhoven must have gnashed his teeth. Just when he was showing off his bright and shiny brand new Data Domain toy, up comes EMC and gazumps him, offering 20 percent more - and all cash at that! - to Data Domain shareholders. Ouch.

Joining the NetApp CEO in grimacing would have been Quantum CEO Rick Belluzzo, whose company has just received a $100m loan from EMC to help develop its DXi disk backup data deduplication technology, the same general class of technology that Data Domain sells in its products.

Belluzzo must be having thoughts, rueful thoughts maybe, that EMC is not buying Quantum for its deduplication technology. He's probably tempering them with the realisation that this isn't a pure technology buy.

EMC wants a market-leading deduplication product supplier with a rounded product set, a technology and feature roadmap, an enthusiastic channel, and a supplier keen to energetically broaden its channel. Quantum just cannot offer Data Domain's market presence and track record and is anyway still beholden to tape, an anathema to disk-loving EMC.

EMC boss Joe Tucci has proposed spending $1.8bn to buy Data Domain and that, besides the $100m extended to Quantum, shows that EMC is deadly serious about the importance of deduplication. It thinks Data Domain has terrific technology with demonstrated market leadership.

Frank Slootman, Data Domain's CEO, must be pleased at the potential increase in his net worth, and mollified at EMC's emphasis on retaining himself and his management team. He may be wistful that he didn't hold out for another $300m with NetApp, and surely hacked off that a joint NetApp/Data Domain marketing attack on EMC is unravelling.

But his problem, and that of his board and executives, is deciding if Data Domain is better off in Sunnyvale with NetApp or stepping inside the big tent represented by EMC in Hopkinton. If their best option is NetApp then they have to work with NetApp to craft a takeover that Data Domain's shareholders will prefer.

The EMC announcement and letter to Slootman says that this is an offensive bid, rather than a defensive bid. Hmmm. There is a train of thought that says if the Quantum technology is so good, then there is no need for EMC to look towards Data Domain. That would indicate that this is a defensive bid by EMC, one geared to prevent Data Domain falling into NetApp's hands and amplifying its attack on the potential purchasers of EMC's DL 3D - deduplicating Disk Library products - courtesy of the large NetApp channel.

EMC is playing against perceived NetApp weaknesses. It says it has a better track record than NetApp on acquiring and integrating companies, an oblique swipe at NetApp's difficulties with Spinnaker and Topio. It's making an immediate tender offer for all Data Domain shares and says its bid is a superior one within the terms of the NetApp acquisition of Data Domain. Shareholders get a straight $30/share instead of $11.45 cash plus 0.75 NetApp shares for each Data Domain share, worth $25/share. There is no need for due diligence or time-consuming financial arrangements.

You can feel the heat coming off the Hopkinton hustle. Come on baby, EMC is saying. Let's dance, right now!

If the bid goes ahead then EMC would have three significant deduplication technologies: Avamar; the licensed Quantum DXi software; and Data Domain's. It says that Avamar's source-based deduplication is distinctly different from Data Domain's target-based deduplication and that Data Domain would complement the DL 3D products. Indeed, a new DL 4000 is due.

That will cut little ice with people thinking that the DL 3D line overlaps with Data Domain's product: it takes months to prep a new product release whereas the Data Domain bid has been put together in just weeks. For people with this opinion they will see an eventual end-of-life looming for one technology - inevitably the Quantum one, given the obvious preference shown for Data Domain here.